SemIndia junks $3 billion fab plans

- Work on $75 million ATMP on at full swing
- Ties up with Jurong to roll out cell phone chip modules 
- Targets Rs 1,000 cr sales in next 18 months

HYDERABAD: SemIndia will not pursue plans for a $3 billion semiconductor chip fabrication (fab) unit that was to come up at the much hyped FabCity here.

“We have decided not to do it,” Bob Kondamoori, vice chairman of SemIndia group and one of the key investors, told DNA Money.

One of the original promoters of FabCity, SemIndia was also to be its anchor tenant beginning with a smaller chip assembly, testing, marking and packing (ATMP) unit in phase I followed by the much larger fab itself.

However, it struggled to achieve financial closure for the fab even as its three-year technology agreement with the world’s second largest chip-maker AMD expired some time back.

Subsequently it was reportedly in talks with other technology companies such as Tower Semiconductor of Israel to take AMD’s place.

In the meantime the global semiconductor scenario has become difficult with the spectre of fab overcapacity looming large.

“We also feel India does not have the ecosystem to sustain a large-scale semiconductor manufacturing investment,” said Kondamoori, who is also the managing director of Sandalwood Partners, $120 million venture fund that has invested in SemIndia.

SemIndia chairman Vinod Agarwal had told DNA Money last week the company had committed to AP on the ATMP unit as Phase I of the project, implying plans for the much larger fab unit were still open.

SemIndia was in the news last week when B V Naidu, managing director of two group companies SemIndia Systems and SemInd Fab Pvt Ltd, resigned.

Subsequently, Kondamoori took over as the MD of SemIndia Systems. Naidu is said to be joining up as executive chairman of Matrix Infrastructure, founded by N Prasad, who had promoted Matrix Laboratories.

Plans for the $75 million ATMP, however, are going on at a fastclip. SemIndia has entered into a joint venture with the Singapore-based Jurong Technologies Industries Corp, to roll out modules for cellphones, set-top box and broadband devices and equipment from the plant in Hyderbad.

The ATMP will have 14 lines to roll out cellphone modules the size of a SIM card with about 60 components on each, he explained. When complete the ATMP will employ 500 people.

The joint venture already has some 30 customers including Motorola and Egypt Telecom apart from three other Indian companies.

The plant will have a capacity to produce $600 million worth of chips every year, he said, adding the equipment was being shipped out of Malaysia to be installed at the FabCity facility.

The SemIndia group has emerged profitable right from the first year, posting a turnover of Rs 100 crore last year.

It is slated to cross Rs 300 crore this year, while over the next 18 months it should grow 300-400% to cross the Rs 1,000 crore mark despite what people might say about the company, Kondamoori insisted.

p_chitti@dnaindia.net